Economic Blues: Bush Without a Clue and Democrats Out of Tune

Wall Street banks are an honest audit away from bankruptcy. Housing prices are plummeting at rates not seen since the Great Depression. Mortgage foreclosures are ravaging neighborhoods and knee-capping state and local budgets. Incomes decline even as the cost of food, gas, electricity and health care soars. Family bankruptcies reach new heights. The gurus -- from former Fed Chairman Alan Greenspan to Republican economist Martin Feldstein to former Clinton Treasury Secretary Larry Summers -- are starting to argue about who's to blame for the recession we may already be in.

So President Bush ventures out of the White House on Monday to a Stafford, Virginia, Rotary Club meeting at the local Holiday Inn's Yak-A-Doo's restaurant "with something important to say" about the economy. His message: Don't worry, be happy.

"This economy is pretty good," says the president. Sure, there's "definitely some storm clouds and concerns" -- like "the credit issue and the housing issue" -- but "the underpinning is good, and we'll work our way through this period."

The answer to the storm clouds: Do nothing and they will pass. Don't raise taxes; pass the president's status quo budget that pares a little off of domestic spending while pumping another $200 billion into the wars in Iraq and Afghanistan.

George is as clueless about the economy as his daddy was about the electronic scanner at the grocery store checkout. Stuff just slips up on you when you aren't looking.

Bush still believes that we've had a "pretty good run" -- six years of economic growth, increased profits and higher stock market prices. "People are working, productivity is high... And that means people are more likely to get paid more."

Tilt. "Are more likely to get paid more," but aren't. This economy works only for those on the top, like the private equity billionaires who pay a lower tax rate than their secretaries (an obscenity just enforced by presidential veto). Most Americans find themselves working harder and longer for incomes that don't keep up with the soaring costs of the basics, from health care to college tuition to a secure retirement. The president -- and the Republicans who follow him like children the Pied Piper -- just doesn't get it.

So Democrats blast him. He's "detached from the reality of most middle-class Americans," says Senate Majority Leader Harry Reid of Nevada. "Out of touch," says Sen. Charles Schumer of New York, chairman of Congress' Joint Economic Committee.

And what's the Democratic remedy? Bush should "restore fiscal discipline at home" and stop spending billions on war abroad, says Reid.

"Fiscal discipline?" A balanced budget is the modern Democrats' Holy Grail. Howard Dean says one of the top four things Democrats stand for is fiscal discipline. Sen. Hillary Clinton promises to balance the budget in her presidential campaign ads. Congressional Democrats shackle themselves to "pay-go" rules that demand that spending or tax cuts be "paid for" by tax increases or spending cuts. Democratic pollsters say that committing to budget balancing is a popular metaphor for bringing government under control.

Great stuff, except -- hello? -- the economy is headed into a recession. Deficits will rise as unemployment and other benefits rise and tax revenues decline. Does anyone really plan on cutting taxes or cutting spending as the economy slows?

In fact, the reverse is badly needed. With banks cutting back credit and families tightening their belts, what's going to drive the economy? The falling dollar will make the U.S. a cheap date for foreign tourists, but that will be offset somewhat by the rising costs of imports. If we are to avoid a deep recession, it's time for government to step up.

So choose your poison: Tax cuts or government investment. The president and his fellow conservative Republicans have no doubt. They peddle tax cuts as the remedy for a slow economy in deficit or a rising economy with surpluses. So every Republican candidate was huckstering new top-end tax cuts when housing was still a bubble, the music was still playing and, in the immortal words of departed Citibank President Chuck Prince, everyone was "still dancing".

A better choice would be a big investment agenda -- in new energy (weatherizing homes and apartments, installing solar and wind energy, etc.), and in basic infrastructure like bridges and roads, next generation broadband, and schools and preschool. The advantage of direct government investment -- as opposed to top-end tax cuts -- is that more of the money and the jobs stay in this country, building investments vital to our future. The choice between a safe bridge in Minneapolis, or more speculation in the Euro or the Chinese toy industry, doesn't seem like a hard choice.

But it does require a wrenching change of gears from Democrats who have turned Clinton's commitment to balanced budgets from a clever tactical concession to an enduring economic principle. Learning to carry the new tune might be a useful way to use the holiday.

Comments

[outnow]

Jack Kemp says that "while many are predicting a economic recession, it doesn't have to be inevitable; indeed, it can be prevented by a more proactive tax and monetary policy."

Charlie Rangel (D-NY), House Ways and Means Chairman, has put together a tax reform bill, including a reduction in the corporate tax and elimination of the alternative minimum tax. There would be a middle-class surtax, the tax hike on capital gains and dividends, and a new tax penalty on unincorporated small businesses.

Mr. Kemp wants the Bush tax cuts which expire in 2011 to become permanent The top marginal rate for individuals and small businesses would climb from 35 to 40%, the dividend tax rate will increase from 15% to nearly 40%, the capital gains tax will climb from 15% to 20%, and the estate tax (death tax, as he calls it) will return from fully repealed back to 55%.

The Heritage Foundation, a conservative think tank, claims that these tax-rate increases will cost more than a million jobs by 2003. He proposes to reduce both top personal and corporate income tax to 25%, and bringing back the earned-income tax credit, which would equalize for low-and middle income families.

The budget deficit currently stands at 1.2% of a near 14 trillion GDP. He proposes to eliminate the alternative minimum tax.

Invoking the "Kennedy-Reagan style" tax-rate reduction, he proposes to stimulate the economy.

Mr. Kemp ignores our crumbling infrastructure and the wasted money in the wars. Who benefits from lifting the tax on estates? You have no more than the top one-tenth of one per cent who leave enough money to even have to pay any tax.

[macfee]

Weak Dollar compared to who?

Looking back when all that mattered was Europe you might have been correct with some of your words.

But what does the "weak" dollar mean to , lets say China? Who is our global competitor for raw goods.

Why is Airbus outsourcing jobs to "Dollar Zone" countries?

Clintons economic success? huh? go look at the numbers and trend them. If you are going to preach stick to meta-physics so that fact checking is a little tougher.

[LeftRight]

While you are correct, and before Reagan no one would have challenged you, right now we are almost $10 Trillion in debt. Just for a quick comparison, at the rate of one dollar per second being paid back, it would take the US government somewhere around 315,000 YEARS to pay off a debt that large. Who's going to lend money to the US government in a couple of years? Hell, who's going to loan money to the US government in a couple of MONTHS? deficit spending is what is needed to keep the economy rolling without a major collapse of the government, but no one is going to be able to finance it, because once our economy collapses, there goes the world.

[radiclib]

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Wealthy people always know what's best, don't they?

No doubt they are telling little W. what to say and he does his best to parrot it, despite an unusual amount of tongue-tied mumbling, even by his standards, at the Rotary Monday.

I wish the Democrats offered an alternative, but they don't. They're ``Republicans Lite'' and they are in the same corporate pockets.

Hate to say it, but things will have to get a whole lot worse before they get better.
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